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Strong third-quarter 2012 results and rising estimates were the prime catalysts for United Rentals’ rating upgrade. This rental & leasing services company has surpassed the Zacks Consensus Estimate for five straight quarters with an average surprise of 171%.

On October 16, 2012, the company reported adjusted earnings per share of $1.35 in the third quarter of 2012, which was roughly 21.6% higher than the Zacks Consensus Estimate of $1.11.

Revenue surged 71% year over year to $1,219 million. Rental revenue of $1,051 million was up 74% and contributed roughly 86% of revenues.

Further, United Rentals generated $45 million in cost savings during the quarter and expects to realize cost savings of at least $100 million by the end of fiscal 2012.

For the third quarter, the company reported an operating margin of 47%, which was up 700 basis points (bps) over the prior-year quarter. This was the highest operating margin reported by the company since its inception. The increase in margin was primarily driven by cost control measures.

Following a robust third quarter, United Rentals is positive and confident about its performance going forward. United Rentals now expects the rental rate for 2012 to be up 7% year over year compared to 6.5% mentioned earlier.

Earnings Estimates on the Rise

The Zacks Consensus Estimate for 2012 is $3.53 per share, which is up more than 9% from the last 60 days and reflects year-over-year growth of 89%. The Zacks Consensus Estimate for 2013 stands at $4.79 a share, inching up 0.2% from the last 60 days and suggesting improvement of 35.4% from the previous year.

Competition

One of the company’s peers, Avis Budget Group Inc. (CAR - Analyst Report), has a Zacks Rank of #3 (Hold) after it reported adjusted earnings of $1.46 per share for third-quarter 2012, missing the Zacks Consensus Estimate of $2.51. However, on a year-over-year basis, earnings surged 43% from $1.02 per share.4% growth in its third quarter 2012 earnings per share.

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